Can You Afford to Build Your Dream Home?

By Investors Group /
November 2017

Many people dream of building the perfect house, from the ground up. Here’s what it costs.

With house prices rising so rapidly over the last five years, many people, especially in Vancouver and Toronto, are tearing down their homes to build new ones instead of purchasing a new place elsewhere. But is building really worth it? Starting from scratch will allow you to create your dream abode, but you need to know the costs.

Find a nook

First, start by finding the right location. In some major cities, such as Toronto where the average price for a detached home is about $1 million, you may have to pay a lot to buy the perfect plot of land. In that case, it could be cheaper to build on an existing property and avoid real estate and land transfer fees.

It can be cheaper to buy land in a more rural area, or in a smaller city like Winnipeg, but sometimes the lower price means you end up spending more on the house itself. “It’s certainly cheaper to build in a smaller town or rural area but often, those people are building luxury, custom homes,” says Krista Hulshof, an architect based in Seabringville, Ont.

It can be cheaper to buy land in a more rural area, or in a smaller city like Winnipeg, but sometimes the lower price means you end up spending more on the house itself.

If your plot is in a more remote location, there could be extra costs if there’s no existing infrastructure. “A septic system will cost $30,000 to $50,000, a well adds $10,000 to $20,000, and getting hydro connected over what may be a long run is also very expensive,” says Bruce Cromie, a Mississauga-based builder. Consider a new subdivision, where surveys and approvals are already in order.

Cromie says tearing down a house on land you buy or already own could be cost neutral – if the market stays steady. “Your new home will be appraised for more and you’ve gained equity that can offset the overall costs of the rebuild,” he adds.

However, doing a teardown could lead to extra time and costs for permits. “Some neighbourhoods have site plan control and that can add at least three months to the build time, meaning your carrying costs for financing will increase,” says Cromie.

Draw it up

Jason Schilstra, lead designer at Rijus Home Design, a Dunnville, Ont.-based company that designs custom homes, says that once you’ve acquired the land, the next step is finding the right style of house. Bylaws may limit how close you can build to the property line, the building’s height and where features like windows can be placed. You can apply for a zoning variance through the city for some of these changes.

You may be able to purchase pre-drawn or stock plans for a home that meets your needs. Or work with a custom home company so every room is just where you want it. Schilstra’s company prices its plans at $1.25 per square foot.

You can also hire an architect and work from scratch. According to Hulshof, architect’s fees for a project can vary from 7.5% to 15% of construction costs. “It depends on the complexity and scope of the project,” she says.

Ready to build

Once you have plans that suit your lot, shop around for a builder.

Typically, construction estimates are provided on a price-per-square-foot basis. The average cost to build a new house in Canada is about $200 per square foot – meaning a 2,000 square foot home would come in at nearly $400,000.

Per-square-foot costs can increase depending on the lot location, type of materials used, and the addition of custom elements such as built-ins, custom cabinetry and other interior and exterior features. You could be looking at $300 or more per square foot.

According to Cromie, choosing whether to build up or out can also affect costs. “Bungalows are the most expensive to build on a per-square-foot basis,” he says. The excavation and foundation and the roof and rafters come with high costs, so low, spread-out homes run pricey.

Meanwhile, if you want a full basement and are close to neighbouring homes, you will need additional shoring so you don’t cause damage to these other houses. That can cost between $50,000 to $100,000, says Cromie.

Dress it up

If your design plans don’t cover the details such as faucets, cabinetry, flooring and window coverings, you’ll need an interior designer to help select these finishes, and help with furniture choices as well. Toronto-based interior designer Lori Howard says design fees vary, and could be at flat fee, or hourly rate. Fees are typically between $100 and $200 an hour.

Really, the cost of your dream home depends on what you want and what you can afford. Set a realistic budget, look ahead to possible extra costs and get firm, signed quotes. Expect some big decisions and a few delays before your dream home becomes a reality.